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Store credit cards - Are they a good deal?

Credit Cards » Is A Store Credit Card A Good Deal?

Stores "often have invitation-only shopping events or exclusive sales for their cardholders," Misasi says.

Whether these benefits are worthwhile will depend at least partially on how often you shop at a particular retailer. You might also have to do a little number-crunching.

"In certain situations, you can get a materially better combination of discount and reward (with the card) than you'd get without the card," says Brad Wilson, founder of deals site Brad', but "even if you get a better deal, there is the hassle and cost of opening and maintaining an account that is not going to get a lot of use beyond the one special purpose."


Expensive debt. What are some these hassles? Well, actually coming out ahead with a store credit card can be tricky, largely because the annual percentage rates on these products tend to run high.

In fact, a recent survey from found that the average APR on the credit cards from America's largest retailers was 23.23 percent, which is significantly higher than the current national average for fixed-rate and variable-rate cards. (Rates on those products hover around 13 percent and 15.6 percent, respectively.)

Plus, while the specifics vary, a store card's rewards program is "always about getting the customer back into the store to spend more money," says Madeline K. Aufseeser, senior analyst at research and consulting firm Aite Group.

So, undisciplined shoppers could easily rack up a bill they can't afford to pay off at the end of the month ... which, in turn, would negate any of the rewards/discounts they've earned on the purchases.

"If there is even a remote possibly that you'd carry a balance, you should pass," Wilson says.

Credit score problems. Another potential drawback to store cards: The credit limits on these products tend to run low, a penchant that could wind up hurting your credit score.

"If you have a $300 credit limit and you put $200 on (the card), your credit utilization is going to be high," says Beverly Harzog, author of "Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made."

Experts generally recommend keeping your credit utilization rate -- essentially how much debt you are carrying versus how much credit has been extended to you -- below 20 percent to 30 percent. The lower, the better.

And utilization isn't the credit score factor that potential store card holders need to consider. Each application will also generate a hard inquiry on your credit report.

So, yes, "if you open up a bunch of different retail store cards or any sort of credit cards in a short amount of time, that would hurt your score," says Anthony Sprauve, senior consumer credit specialist at FICO.

Should you apply?

As with most credit card considerations, it all depends.

If you revolve a balance, you should shop around for a low-interest credit card instead. If you shop a lot at one particular retailer, aren't prone to carrying a balance and have a credit score that can handle a new inquiry, the card could prove worthwhile.

However, if you do decide to take your favorite retailer up on an offer, make sure to carefully read the terms and conditions. Check to see, for instance, if the card carries an annual fee and what the go-to APR will be once any deferred-interest promotions lapse.

You should also ask at the register how you can pay your bill, because in order to qualify for the promotional discount, that day's purchases will typically be charged to the new card.

"When people open these cards, sometimes they sort of forget about it," says Linda Sherry, director of national priorities at Consumer Action, a national nonprofit advocacy and education organization.

You could easily miss your first card payment, incurring late fees, interest and other potential penalty charges. The missed payment could also cost your credit score 70 to 90 points, depending on your current credit score.

"Don't leave the store before you ask ... 'When can I expect the bill to arrive and how can I log in online to look at it,'" Sherry says.


Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

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